Present Value of $1 PV of Annuity of $1

Issuance of a Bond at Face Value

On January 1, 2017, Whitefeather Industries issued 1,000, $1,000 face value bonds. The bonds have a(n) 10-year life and pay interest at the rate of 10%. Interest is paid semiannually on July 1 and January 1. The market rate of interest on January 1 was 10%. Use the present value tables that may be found by clicking on the present value table links above. Round your answer to the nearest dollar.

Required:

1. Calculate the issue price of the bonds and record the issuance of the bonds on January 1, 2017. Round your final answer to the nearest dollar.

$___________

Identify and analyze the effect of the issuance of the bonds on January 1, 2017.

Activity
Accounts
Statement(s)

How does this entry affect the accounting equation? If a financial statement item is not affected, select "No Entry" and leave the amount box blank. If the effect on a financial statement item is negative, i.e, a decrease, be sure to enter the answer with a minus sign.

Balance Sheet

Income Statement

Stockholders'

Net

Assets

=

Liabilities

+

Equity

Revenues

Expenses

=

Income

2. How would the issue price have been affected if the market rate of interest had been higher than 10%. _______________

3. Identify and analyze the effect of the payment of interest on July 1, 2017.

Activity
Accounts
Statement(s)

How does this entry affect the accounting equation? If a financial statement item is not affected, select "No Entry" and leave the amount box blank. If the effect on a financial statement item is negative, i.e, a decrease, be sure to enter the answer with a minus sign.

Balance Sheet

Income Statement

Stockholders'

Net

Assets

=

Liabilities

+

Equity

Revenues

Expenses

=

Income

4. Calculate the amount of interest accrued on December 31, 2017. If required, round your answer to the nearest dollar. $________